Compensation Fund, UIF & Productivity SA Quarter 1 & 2 performance

Meeting report

Briefing by Compensation Fund (CF)

Mr Vuyo Mafata, Commissioner, CF, said the Fund’s strategic plan had three areas; compensation and benefits; medical services; and disability care.

The overall performance in achieving its targets In Q1 and Q2 was 86%, in comparison with the 67% attained in Q4 of 2017/18. He spoke to the programme performances in the provinces as well as the performance as linked to the budget.

He said there was underspending on Programme 1 because of savings in projects. On Programme 2, the underspending was because of the revised way in which budgeting for COID services was taking place. On Program 4, the underspending was because the program was a new one and only a Chief Director, as head of operations, had been appointed and so most of the budget was not spent.

Compensation of employees is at 46% spending , which reflect a normal spending  for the period under review.

A contract for the new claims system was signed end of August 2018 , the project started on the third September 2018 and this will impact positively on the expenditure movements for the following reporting period.

Phase 2 of the CF filing project has been delayed due to lack of SAP resources. Case ware software licence is still pending supply chain processes and therefore affecting the expenditure movements for the period under review.

An amount of R17.2 million that was allocated for projects under Directorate Organisational Effectiveness has been set aside to be surrendered due to the plans to have those projects to commence in the next financial year (2019/2020).

The unwinding of interests also contribute to slow movement of expenditure as it will only actuaries have made their yearend valuation.

Expenditure on travelling activities that occurred for various purposes within the current reporting period will only reflect in the expenditure information for October 2018 due to outstanding invoices.

Due to cost cutting measures there were numerous meetings that took place internally which affect venues and facilities and catering expenditure item for the period under review.

Plans are under way to have provincial strategic workshop during the 3rd quarter (Oct-Dec 2018)and this will contribute on expenditure  movement during that period

The process for budgeting for medical and compensation benefits has been reviewed based on prior period actual expenditure. This has resulted in  the compensation benefits budget amount being significantly reduced.

The pension payments are not reflecting on the actual expenditure as the amounts are set off against the current liabilities.

What is outstanding is the actuarial valuations which will affect the benefits expenditure. These valuations will be finalised with the interim financials by end of November 2018.

The report shows top 20 injuries and in which industry sector and company the injuries are mostly incurred. The report reflects Multiple Superficial Injuries as the most suffered injury by workers at workplace. The nature of injury contemplate that the working class of citizens are working at food and retail sector (at Shoprite checkers and Pick N Pay). The report will assist in reducing number of injuries suffered by workers by:

-Visiting the companies with higher number of injuries.

-Reinforce compliance with OHS.

-Promote safety measures with specific focus for target audience being identified and the type of industries they work in.

The CF also provided an update on the progress in implementing the Committee’s Budgetary Review and Recommendations:

- The Compensation Fund has developed an SOP to ensure accurate reporting and consolidation of investments in terms of GRAP standards.

- The new CF Organisational Structure is catering for 268 CSO’s across all provinces. The process of recruiting the posts is dependent on the placement of the current CSO in provinces, followed by the advertisement of the vacant CSO’s posts that are outstanding.

- A new Online Claim system is being developed on SAP and the project commenced on 03 September 2018. It will take 52 weeks (until 31 August 2019) to complete the project.  There are ongoing enhancements for the current claims system (Umehluko) claim system and SAP which are managed in the weekly operational meetings.

(See full presentation)

Discussion

The Chairperson asked if there were 99 inspectors countrywide.

Mr Mafata confirmed that there were 99 inspectors countrywide for Compensation for Occupational Injuries and Diseases (COID) services.

Ms L Theko (ANC) wanted to know about the top 20 injuries occurring countrywide. Was there an intervention to improve or minimise injuries on the job at the top five companies where injuries occurred?

Mr M Bagraim (DA) thanked the Commissioner for responses to his personal communication. He said many times employees were not registered and only found this out when they went to the Fund. He suggested using the 99 inspectors to target this type of work, as some of the businesses were medium sized businesses. He said going through the system was very difficult, with people getting bogged down, as had been his experience trying to assist a claimant from Port Elizabeth.

Mr P Moteka (EFF) asked how the Fund was managing the country with 99 inspectors?

Ms F Muthambi (ANC) asked for the variances on slides 26 to 28 be explained further.

The Chairperson asked what the core business of the Fund was to ensure that that was not undermined. How was quality assurance done on the approval of medical devices? Were funds generated outside the budget? How was the spending of these funds monitored?

Ms S Van Schalkwyk (ANC) said the Fund had come a long way, having instituted various interventions and there had been an overall improvement. Linked to the 46% expenditure on compensation of employees, she wanted to know the vacancy rate, what action was taken to fill vacancies and what were the reasons for struggling to fill some vacancies. She asked when the case ware software license would be finalised. There had been a problem with legacy medical invoices of the 70s and 80s that had not been paid and she wanted to know what the status of these were. Regarding the top five companies in terms of injuries, she noted there were repeat offenders in the retail sector but there was a new entrant, the Western Cape Department of Health, which was a concern. What caused this new entry and was it part of a continuous trend?

Mr Thobile Lamati, Director-General, Department of Labour, said the number of COID inspectors might be small, but in the technological era if more people were appointed they would become redundant. In the area of automation, the CIPRO registration and updates would automatically be linked to the Fund. The Fund was currently busy integrating the database systems.

The work of the inspectorate was informed by the information generated by the Fund, for example, the top 20 injuries list.

The Chairperson asked if there were good employers.

Mr Lamati replied that there were good employers but there were also bad employers.

The Chairperson said thousands of complaints were lodged on non-compliance, so the Fund would need more inspectors.

Mr Lamati said there was an increase of approximately 200 inspectors for enforcement of the national minimum wage.

On the questions around the top five companies and top five injuries, Mr Mafata said occupational health and safety was working with Shoprite on improving health and safety measures, so there had been work done. The top five companies and the top five injuries were related, and the injuries were superficial injuries.

On Mr Bagraim’s comments on processing a claim, he said  that one of the bigger processing offices was the Port Elizabeth office where they received much more claims than Gauteng and Western Cape, so the Fund was assisting regarding capacity there and was reviewing provincial structures.

He said the complexity of registering old claims was still an issue because all the documentation was not submitted and there was now a change from a manual system to automation. Some documents were lost, and notice would be given that the Fund would provide a window period for claimants to provide claim documents within three months. This would be the third time such an exercise was done and after this period expired, claimants would need to submit a totally new claim.

On the budget and remedial action taken, he said there was no slush fund, but the budget was reviewed and the Q3 budget for COID services was now R1.1b, down from R5b, because claims funds would be transferred to the capital account and be paid out from there, not from the operations account as occurred in the past.

On the budget for medical services, he said Orthotics and Rehabilitation was a new programme and a chief director had been appointed as head of operations and the recruitment to staff the program had just started. The rehabilitation unit comprised of clinical, vocational and social rehabilitation to help injured beneficiaries assimilate back into the economy and community. The budget of the Orthotics and Rehabilitation programme of R2.4m would increase to R64m.

He said the validity of claims for medical devices was checked and validated and validation and authorisation had been separated. Autopay had been introduced because of delays in authorisation and therefore there had been a reduction in delays.

There had been a 40% increase in capacity and therefore an increase in the vacancy rate which now stood at less than 18%.

He said the challenges head office and provincial offices experienced were challenges in appointing medical professionals. The Fund had appointed medical professionals but were competing with medical aids and hospitals to find and keep them. The filling of a position for a doctor in occupational therapy had taken two years to fill in the Western Cape. 

On the current status of medical invoices of prior years, he said that an opportunity would be given to provide any outstanding documentation, then the claims would be closed off. After that a new claim would need to be submitted.

He said occupational health inspectors would work with the department of health in the same way as they did with the retail stores.

On case ware software, Mr Thando Headbush, Acting CFO, CF, said the licences were paid, so interventions were put in place and interim financial statements were presented to the audit and risk committee in December.

Ms Van Schalkwyk wanted an update on chronic medication distribution and having rehabilitation centres to ensure in-house rehabilitation for those who needed it.

Mr Moteka asked how the Fund was managing currently with only 99 inspectors countrywide, not on the future automated processes. He said the top bad companies should have been attended to and the Committee should have received feedback. Why was it talking two years to appoint a doctor?

Mr Bagraim asked why the UIF was not interacting with the Internal Revenue department. He felt that the SARS inspectors could do the UIF investigations via computer or UIF investigators could do it via access to SARS systems. He said one third of small businesses were not registered for anything.

On the vacancy turnaround, Ms Muthambi asked about human resource planning. She said the AG had raised issues in the audit action plan and wanted to know if it was being implemented.

The Chairperson asked whether what was missing was from employers and third parties regarding old claims. He asked whether the claimant could be punished when the employer did not provide documentation. He said doing the same exercise three times did not help the Committee. How did the Fund compensate for a lack of human intervention in terms of quality control of claims?

Mr Mafata said the chronic medication distribution programme was in place and fully running and delivering medication to claimants. The Fund was working with Treasury on the models to be used in establishing a rehabilitation centre. There should be a report available in the new financial year and in the new strategic plan.

On how the Fund was managing with 99 people, Mr Lamati said there was a need to manage limited resources to get the maximum impact. He said the inspectors were equipped to carry out the work.

On the top 20 injuries and the companies where it occurred, he said work was being done and he would make the information available to the Committee.

On the challenges in filling vacancies, he said these were for specialised skills and government was not paying high salaries and so doctors went to greener pastures. He said the notches on government salary scales did not accommodate specialisations, so it was not attractive to young professionals.

On outstanding claims, he said that in the absence of all documents a claim could not be registered. These were all registered as outstanding claims.

The Chairperson said the Fund should present on the top 20 injuries and companies on the 6 March 2019.

Briefing by Unemployment Insurance Fund (UIF)

Ms Judith Kumbi, Chief Director: Operations, UIF, spoke to the Q2 performance. She said the overall performance in achieving its targets was 63%, up from the 58% attained in Q2 of 2017/18.

On Programme 1: Administration, she said the vacancy rate had been reduced but it had been impacted by the addition of 28 new posts to the establishment. There had been delays in the implementation of the integrated claims management system and only 33 of the targeted 48 sites were upgraded to have free Wi-Fi access. There was 64% underspending of the budget caused by vacant posts and the management fees set aside to pay the PIC.

On Programme 2: Business Operations, there was 15% underspending of the budget due to less benefit payments, lower compensation of employees and a decrease in SARS revenues.

On Programme 3: Labour Activation, she said the number of UIF beneficiaries provided with learning or work place experience had not achieved its target because the evaluation process for expression of interest for a service provider was stopped as the procedure to be followed was unclear. This also resulted in 93% underspending in the program.

(See full presentation)

Discussion

The Chairperson said a programme was instituted to train people via a training service provider. The training service provider then administratively bungled and so did not get money. Hence training closed down and affected the Fund.

Mr Bagraim said there were still long queues in centres and its online servers were mostly down. What did the UIF do when people who were not registered, contacted them? He said the call centres were so overburdened they were useless. He said the training layoff scheme was too onerous. What would UIF do when Edgards Stores closed down?

Mr Moteka said that if a service provider was not provided with funds, the end user suffered. How were service providers punished? He was concerned with the underspending of Programme 1 of 64%. Was there a possibility of the underspending being spent in the current quarter?

Ms Muthambi asked about the action to be taken to decrease the vacancy rate. She noted the contradiction that the report indicated that vacancy adverts closed in August, but the report also said no vacant positions were advertised.

On the number of upgraded provincial sites, she asked what the timeline was to implement the plan as there were no timelines given in the slide and there was no responsibility assigned in the audit action plan. These issues were raised by the AG and it would be difficult to follow up because the plan was very generic. Was there a revised audit action plan? She said the quality of the documents submitted to the Committee was poor and reeked of malicious compliance.

Ms Theko said that in Programme 1, the vacancy rate had decreased, but 28 new posts were added to the establishment. How could the vacancy rate have decreased when 28 new posts were added? Was the Wi-Fi access at UIF centres blocked to only access the UIF portal?

Ms Van Schalkwyk asked about the registration of employees dealing with the school feeding scheme. She asked about the figure of 39% completion on slide 40. Why was it not closer to 50%? Could all identified findings be dealt with before the financial year end?

The Chairperson said he wanted a report on slide 38 and the 71 findings. He wanted to know what the entity was doing about it and which ones were the ones that the Fund was unable to deal with. He said SCM achievement stood at 15% in Q2. This was an issue and in the next audit cycle there would be a repeat finding. He asked the DG whether the Department kept a register of unemployed people. He said there had to be a way to fast track death claims.

Ms Kumbi said that when a contract was signed with a service provider, there was an agreement on the deliverables. Payment might get delayed, but the training continued. There had been no instance where training had stopped.

On the long queues at labour centres, she said that a service provider had been appointed for queue management services in Q3. The first phase was its implementation in 30 centres and queue marshals had also been appointed.

On UIF’s online capability, she said the design of its online capability in its modernisation programme was not user friendly, so the look and feel were being changed. It would be ready to roll out in April 2019.

She said that the UIF would take up the case for people who were not registered for UIF when it was not the fault of the client.

She said the call centres could not handle the volume and that was why callers could not get through.

On the training layoff scheme, Mr Lamati said that it was an outcome of the jobs summit and it needed to be reviewed. 11 companies had been assisted and 905 jobs were saved because of a review of the scheme and an improvement in the turnaround times.

He said the UIF was dealing with a large number of workers, like for example Edcon, where the Department had engaged with Edcon and the PIC. It was estimated that the UIF would pay out R1.2b in UIF benefits if Edcon had to close.

On the audit action plan, Ms Kumbi said that each manager had to submit a plan with timelines to address the audit findings and this was being monitored.

On an achievement of 39% and not 50%, she said Q2 reflected what was done in two months only and there had been further progress to date.

On findings on investments, she said the UIF needed to do disclosure for group standards and this was all done. The only issue was doing investments in associate companies as auditors relied on audited financial statements of these companies and these companies’ financial year end were not aligned with that of the UIF. The UIF was a minority shareholder so could not influence an alignment. She said the UIF would put in its own internal controls. She said the UIF was still in discussion with the new auditors and this was the only possible issue.

She said the reasons for the variance were that the 28 posts were closed in August, but new vacant posts to man the call centre arose, therefore the big vacant posts number.

On the vacancy rate and how it was related to the underspending of 64%, she said the underspending was not only due to the vacancy rate as there were other factors too. The biggest factor was the management fees budgeted for the PIC. UIF was supposed to give the PIC a new mandate, but the PIC was not given a new mandate for Q1 and Q2 even though it was budgeted for. A new mandate always received a higher budgeted amount because it might want to invest in other asset classes and so incur higher management fees. 

On secureness of the UIF Wi-Fi access, she said only the Department’s website could be accessed and the system was secured.

She said the UIF did do death benefit claims and the only issue was the backlog. The death benefit targets were being achieved currently. There were labour centres that were not processing previously so it was being processed via two centres, causing delays. Additional staff was appointed, and they were now in the process of rolling out processing to all labour centres.

The Chairperson wanted the UIF to assess the capacity of its internal audit and to send a detailed audit action plan to the Committee.

Briefing by Productivity SA

Mr Mothunye Mothiba, CEO, Productivity SA, said the aggregate performance in achieving its targets in Q1 and Q2 was 37%.

The highlight in the first quarter was that 2330 Small enterprises and cooperatives on ESD programmes supported through Productivity and operational efficiency enhancement programmes were trained against the target of 2330. This was made possible by the strategic partners who gave enough access to beneficiaries to be trained.

On Programme 1: Administration, there was 100% achievement.

On Programe 2: Providing Support to Programs for Sustainable Employment, there was 50% achievement in both quarters.

On Programe 3: Providing Support to Companies Facing Economic Distress to Retain Jobs, there was 0% achievement in both quarters.

On Programme 4: Contributing to Employment Through Research there was 100% achievement in Q1, and it was not applicable in Q2.

On Programme 5: Promoting Social Dialogue there was 0% achievement in Q1 and 50% in Q2.

On Programme 3, he said management had approached the board and the board had resolved to suspend the program due to funding challenges. In Q2 the income budgeted to accrue from the UIF contribution had decreased from R54.3m to R2.7m and because of this there would be a deficit at the end of the financial year. 

(see full presentation)

Discussion

The Chairperson said the briefing made no mention of the issues raised by the Committee at the last meeting with Productivity SA. What had happened on sorting out the organisation’s funding problem?

Mr Mothiba said there had been discussions with the DG, but it was too late to be completed for this meeting. The programme was suspended by the board because of a lack of funding for 2018/2019. What they had focused on in the discussions was 2019/2020. Productivity SA was dealing with what to do in 2019 as the jobs summit had noted five points on jobs preservation.

The Chairperson said that closing part of Productivity SA’s operations did not help it in meeting its goals.

Mr Moteka said that if one looked at the figures, for example item number 3 on providing support to companies to enable job preservation (slide 9) and bearing in mind Edcon, the entity was not working. He asked the DG whether the entity was needed and what would be done regarding deliverables such as item number 3. A remedy was needed.

Ms Theko queried the accuracy of figures related to Q1. She said the 50% achievement should actually be a 0% achievement. What was the status of the action plan relating to the AG’s findings? What was the entity’s audit status, was it qualified or unqualified?

The Chairperson said Productivity SA could provide a report the following week.

Ms Muthambi asked where the financial statements for Q1 was. The entity was a schedule 3A public entity and the DG had to explain why it had not been given any money. There was an anomaly in that the APP was informed by the budget. She said the variances were on most items. There was a need for the entity to get proper resources. At the moment it was only paying salaries.

The Chairperson said item number 2 on providing support to sustainable development on slide 9 needed explaining.

Mr Mothiba explained item number 2 on slide 9 with reference to slide 18/19 and he acknowledged that item number 5 was incorrect. The 50% achievement recorded for item no 5 was incorrect and should be corrected to 0% because the target was not achieved.

He said he would provide information on the AG’s report and added that the entity had received an unqualified report.

Mr Lamati said that the entity was needed as it played an important role in the economy. It derived its mandate from S31 of the Public Services Act. Funds were given for this to save jobs.

He said Productivity SA was established in 2008 during the credit crunch time and it had entered into an agreement with the UIF to help companies turnaround. The DTI had also come on board as funder and the UIF had kept on funding since then. In 2016 however, the problems started, as challenges were uncovered in the entity’s management and the management of the UIF funds. A new CEO had been appointed to address the irregularities. The problems in the accounting of funds provided by the UIF persisted.

He said that the turnaround solution was not fully funded by the Department and was dependant on UIF funds. He said this funding should be based on the PSA and that was what the discussions with him had centred around. He did not anticipate this funding as being a problem going forward.

The Chairperson asked what happened to the UIF contribution because stopping the funding defeated the objective. There must be  a developmental intervention not a punitive intervention, if UIF still had an interest.

The meeting was adjourned.